Impact of Strategic Type on Success Measures for Product Development Projects*

Abstract

Does the strategic type of firm affect which success measures should be used for product development (PD) projects? This paper theorizes that it should and finds that it does because the PD projects undertaken are usually an expression of the strategic type of the firm. The purpose of this research is to affirm a 1996 survey of members of the Product Development & Management Association (PDMA) that proposes that firms' PD performance measures should vary by their strategic type. Thus, for example, prospectors, the strategic type most likely to introduce new products to new markets, should place greater importance on PD success measures consistent with their characteristic strategies of changing product lines and early market entry. In contrast, defenders, the strategic type most likely to maintain stable product lines for existing markets, should place greater importance on PD success measures consistent with their characteristic strategies of stable product lines and market penetration. Analyzers, a hybrid type between prospectors and defenders, should prefer measures consistent with their characteristic strategies for improving products and being early followers in newer markets. To relate strategic types to specific success measures for PD projects, this paper proposes a model of the relationship based on the degree of project newness to the firm and then catalogs measures of PD project success and groups them according to degree of project newness. The research findings are based on survey responses from 222 individuals who are employed by financial service providers, who identified their firms by strategic type and rated the importance of PD success measures to their firms. The importance of 21 performance measures is compared by strategic type to find significant differences among prospectors, analyzers, and defenders. This research finds several significant relationships. prospectors, for example, attach greater importance to customer satisfaction, launch timeliness, and product return on investment, all of which may be characterized as relating to a higher degree of project newness to the firm. defenders and analyzers, on the other hand, attach more importance than prospectors to measures of unit volume, cost reduction, and margin goals, all of which relate to a lower degree of project newness to the firm. In short, because prospectors seek to introduce new products to new markets, they consider important those measures, which accord with greater product and market newness. The major conclusion of this paper is that strategic type affects the importance of project performance measures and that all firms should not use the same success measures. Firms should contextualize their success in PD projects based on their strategic type. This conclusion resonates with previous findings that strategy is a key determinant of PD success, though it is infrequently included in PD success studies. This paper, therefore, challenges the implicit assumption in the mainstream of PD success literature that success can be determined without regard to firm strategy.